Person DB was a director in company FBF which owned a branch of fitness club in Mexico. DB owned 15 percent of the total stock of the company FBF and was also holds the position of a tanning technician at one of the fitness clubs in the city. According to finance report, FBF was facing financial loss. ML discussed terminating the tanning operation. DP who was one of shareholder discloses that DB owned stock in company S from which FBF purchased its tanning equipment. DB and MV owned 37 percent of FBF also held shares of the company S and voted to replace ML from the board of directors. To find: The share of DB in S establishes a conflict of interest.

Question

Want to see the full answer?

Answer 1

Question

Chapter 18, Problem 2RE

Summary Introduction

Case summary: Person DB was a director in company FBF which owned a branch of fitness club in Mexico. DB owned 15 percent of the total stock of the company FBF and was also holds the position of a tanning technician at one of the fitness clubs in the city. According to finance report, FBF was facing financial loss. ML discussed terminating the tanning operation. DP who was one of shareholder discloses that DB owned stock in company S from which FBF purchased its tanning equipment. DB and MV owned 37 percent of FBF also held shares of the company S and voted to replace ML from the board of directors.

To find: The share of DB in S establishes a conflict of interest.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Merrill Lynch employed Post and Maney as account executives. Both men elected to be paid a salary and to participate in the firm’s pension and profit-sharing plans rather than take a straight commission. Thirteen years later, Merrill Lynch terminated the employment of both Post and Maney. Both men began working for a competitor of Merrill Lynch. Merrill Lynch then informed them that all of their rights in the companyfunded pension plan had been forfeited pursuant to a provision of the plan that permitted forfeiture in the event an employee directly or indirectly competed with the firm. Is Merrill Lynch correct in its assertion? Why or why not?

Naquin, Dubois, and Hoffpauir incorporated to form Air Engineered Systems and Services Inc. Dubois became president and Hoffpauir became secretary-treasurer. Naquin was employed by the company. Conflicts among the three caused a break down in the working relationship. Dubois and Hoffpauir offered Naquin $2,000 a month for 10 years for his share of the business if he would sign a noncompetition agreement. Naquin refused to sell until he could examine the corporate records. Dubois and Hoffpauir refused to allow Naquin to see the books until he signed the noncompetition agreement. Could Dubois and Hoffpauir attach such a condition to Naquin’s request? Explain.

Zenith Steel Company operates a prosperous business. In January, Zenith’s chief executive officer (CEO) and president, Roe, who is also a member of the board, was voted a $1 million bonus by the board of directors for the valuable services he provided to the company during the previous year. Roe receives an annual salary of $850,000 from the company. Black, Inc., a minority shareholder in Zenith Steel Company, brings an appropriate action to enjoin the company from paying the $1 million bonus. Explain whether Black will succeed in its attempt.